Insurers along the East Coast are bracing for potentially the largest winter storm seen in several years. While insurers stand prepared, the storm could cause winter storm losses this year to go beyond the uncharacteristically low figures experienced recently.
“Certainly, there is the potential for some very significant claims—certainly in the Boston area. If there are power outages, that leads to business interruptions, travel cancellations,” says Howard Mills, director and chief advisor, Insurance Industry Group, Deloitte LLP. “But the industry remains very well-capitalized, well-positioned to absorb the impact of the storm.”
Part of the reason the industry remains poised is because winter storm damages have been few and far between recently.
“We had a warm winter last year and have not had a storm of this magnitude predicted for some time,” said Robert Hartwig, president and economist for the Insurance Information Institute (I.I.I.). “In a given year, insurers typically see somewhere between $1 and $2 billion in terms of insured losses over a winter season—so catastrophe-level losses over the entire winter. But that’s been lower in the last couple years.”
Insured annual U.S. winter storm losses in 2012 totaled $38 million, according to Munich Re. Despite that dip, winter storms are the third-largest cause of catastrophe losses, behind only hurricanes and tornadoes, according to I.I.I. From 1992 to 2011, winter storms resulted in about $28 billion in insured losses, according to ISO.
According to Hartwig, insurers should expect to process claims relating to ice dams along roofs and gutters, frozen pipes, and in worst-case scenarios, collapses from snow. Also, high wind damages are anticipated from this storm, which will also likely lead to claims related to homes, business and also motor vehicle accidents. Mills also added power outages to the list of concerns.
“Some of the initial challenges will be access,” said Mills. “If we’re going to see some of the snowfall figures that we’re seeing predicted, if we have some extended power outages, just getting to those areas will be important. This is something [the industry has] been getting better and better at given the frequency of extreme events, whether hurricane or blizzard: They will be in the field early. The industry really earned very high marks for their response in the wake of Sandy. They were on the site writing checks very quickly; I expect the same in the aftermath of this storm.”
Asked about the still-ongoing Sandy recovery along the East Coast, Hartwig said: “The Sandy claims have largely been adjusted at this point. Sandy generated 1.5 million claims; in an event like this, it might be measure more in the tens of thousands. Insurers have the resources on the ground, both in terms of human and financial resources, to handle any and all claims that arise very, very quickly.”
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